The International Association of Fire Chiefs has rejected the National Volunteer Fire Council board’s August statement, where the association opposed the Volunteer Firefighters Fairness Act (H.R. 2630). The active bill recommends amending the Internal Revenue Code (IRC) of 1986 to classify volunteer firefighters as statutory nonemployees for the purposes of taxing benefits. The act is in the first step of the legislative process and has been referred to the House Ways and Means Committee. If passed, the amendments would apply to services performed after Dec. 31, 2011.

The IAFC released a statement supporting H.R. 2630, which would clarify the IRS’s treatment of volunteer firefighters and let fire departments issue 1099 forms to their volunteer firefighters instead of W-2s. The IAFC referenced the Fair Labor Standards Act, where a volunteer firefighter can receive up to 20% of the prevailing wage in his or her area before being considered an employee of a fire department.

Such a contradiction between the IRC and the FLSA causes confusion for a fire chief about the employment status of his or her volunteer firefighters and puts fire districts in a position of liability, said Gary McQueen, chief of the Sandy (Ore.) Fire District, a combination department with about 55 volunteers. McQueen said when volunteer departments distribute a W-2, there are unintended consequences.

“Once you enter into an employee relationship with a volunteer, that opens the door for employment benefits,” he said. “My department has been on the hook for unemployment for volunteers because of their employment changes. It doesn’t seem to me that taxpayers should be on the hook because of a volunteer’s private employment status.”

Historically, fire departments used IRS Form 1099 to report benefits and nominal payments for their volunteers. Increasingly, volunteer fire departments are being instructed by local IRS offices to use Form W–2 to report the payments and reasonable benefits, instead of Form 1099.

Now, H.R. 2630 authors claim volunteer firefighters performing specific duties should not be considered an employee, and the fire department should not be considered as an employer of their services. Instead, the bill aims to add language to Sec. 3508 of the tax code language classifying volunteers as qualified emergency volunteers or statutory nonemployees, currently used to classify real estate agents under a 1099.

The bill’s language states that the employment status applies if the only compensation received by such individuals for performing qualified services is in the form of reimbursement for reasonable expenses incurred in the performance of such services, or reasonable benefits, including length-of-service awards.

The NVFC is concerned that passage of H.R. 2630 would shift a tax and reporting burden shared by the department and the volunteer onto to the volunteer alone, said Dave Finger, NVFC director of government relations. Finger said under the act, volunteers would be responsible for the total of payroll taxes — usually shared by the employer — in addition to sorting out tax codes or hiring an accountant to make sure it’s done right.

“That raised issues because when you are treating them as employees, you have to pay payroll taxes,” he said. “Under the bill, those payroll taxes don’t go away. [Volunteers] are going to be considered self-employed and it will be up to them to pay all of those taxes themselves.”

In fact, McQueen’s already had volunteers ask for a W-2 so that at the end of the year they didn’t have to come up with the extra money to pay taxes. “That’s tough for a volunteer to do,” he said. “So I truly understand that.”

What McQueen doesn’t like about the W-2 is the burden on the fire district, such as the unintended consequences of paying for a volunteer’s unemployment.

“I have mixed feelings, but in general I support the 1099s because I have to be protective and conscious of those issues that can harm the fire district, like paying unemployment or a requirement to pay minimum wage,” he said.

In addition, classifying volunteers as employees further could harm volunteer organizations, including members lobbying to unionize or for retirement benefits, McQueen said.

“That type of volunteer compensation system is impossible for a volunteer department to sustain,” he said.